Suppose Policy Makers Pass a Budget That Results in a Tax

question 66

Multiple Choice

Suppose policy makers pass a budget that results in a tax cut. This tax cut will have a greater impact on net exports when:

• A) investment is unaffected by changes in income.
• B) the sensitivity of investment to income is smaller.
• C) the marginal propensity to import is larger.
• D) the economy is closed.
• E) the marginal propensity to import is smaller.

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